Multiples for SaaS Turned Lower in Q3

01/09/2017By Sammy Abdullah, CFA

Every quarter we track the revenue multiples of 43 publicly traded SaaS companies to get a sense of where valuations are and where they’re trending. During Q3, the median revenue multiple was 5.75x. This marked a decline from Q2’s median of 6.39x and is now below the average median of the past 8 quarters which is 6.09x. The data is below.

TTM

TTM

TTM

Enterprise

Market

EBITDA

YOY

Q3 2016

Q2 2016

Q1 2016

Q4 2015

Q3 2015

Q2 2015

Q1 2015

Q4 2014

Name

Ticker

Revenue

EBITDA

FCF

Value

Cap

Debt

Cash

EV Calc

Margin

Rev Growth

EV/Rev

EV/Rev

EV/Rev

EV/Rev

EV/Rev

EV/Rev

EV/Rev

EV/Rev

2U

TWOU

$192

-$20

-$1

$1,260

$1,390

$0

$157

$1,233

-11%

39%

6.43x

8.91x

6.52x

5.84x

5.56x

10.48x

8.83x

7.58x

Athenahealth, Inc.

ATHN

$1,050

$89

$197

$4,310

$4,280

$291

$130

$4,441

8%

19%

4.23x

5.07x

5.26x

5.49x

6.90x

6.51x

6.14x

6.26x

Bazaarvoice, Inc.

BV

$201

-$8

$14

$353

$406

$37

$86

$357

-4%

4%

1.77x

2.26x

1.27x

0.99x

1.62x

1.90x

2.15x

2.19x

Benefitfocus, Inc.

BNFT

$225

-$28

-$27

$899

$893

$70

$55

$908

-12%

32%

4.03x

5.54x

5.34x

5.02x

6.41x

6.46x

6.06x

7.63x

Box, Inc.

BOX

$374

-$126

-$11

$1,680

$1,990

$65

$168

$1,888

-34%

44%

5.05x

5.27x

4.39x

4.54x

5.92x

6.29x

7.72x

8.14x

BroadSoft, Inc.

BSFT

$329

$39

$74

$1,190

$1,260

$198

$249

$1,208

12%

29%

3.68x

4.21x

4.10x

3.80x

3.95x

3.63x

4.16x

4.12x

Castlight Health, Inc.

CSLT

$93

-$63

-$47

$397

$513

$0

$116

$397

-68%

37%

4.26x

3.47x

3.54x

1.92x

3.15x

6.59x

11.38x

12.16x

Cornerstone OnDemand, Inc.

CSOD

$410

-$47

$55

$2,380

$2,360

$236

$237

$2,359

-11%

28%

5.75x

6.51x

5.58x

4.32x

5.93x

6.75x

6.20x

5.74x

Five9, Inc.

FIVN

$154

-$2

$4

$739

$752

$45

$57

$739

-1%

27%

4.80x

5.58x

3.67x

3.17x

2.38x

1.65x

2.33x

2.35x

Hortonworks, Inc.

HDP

$170

-$236

-$100

$260

$529

$0

$84

$446

-139%

72%

2.62x

2.49x

3.85x

3.84x

6.74x

11.26x

20.10x

16.16x

HubSpot, Inc.

HUBS

$248

-$36

$20

$1,560

$1,700

$1

$114

$1,587

-15%

52%

6.41x

8.56x

7.32x

6.08x

14.04x

9.27x

13.77x

9.72x

IntraLinks Holdings, Inc.

IL

$290

$20

$36

$804

$776

$80

$48

$809

7%

7%

2.78x

2.17x

1.72x

1.70x

2.08x

2.24x

2.40x

2.44x

Jive Software, Inc.

JIVE

$203

-$7

-$10

$240

$340

$2

$101

$240

-3%

5%

1.19x

1.12x

0.93x

0.71x

1.47x

1.07x

1.72x

1.51x

Lifelock

LOCK

$650

$47

-$53

$2,090

$2,270

$0

$166

$2,104

7%

16%

3.24x

2.24x

1.66x

1.32x

1.80x

0.79x

2.28x

2.18x

LivePerson Inc.

LPSN

$226

$17

$28

$386

$432

$0

$51

$380

7%

-5%

1.68x

1.86x

1.47x

0.90x

1.65x

1.96x

2.08x

2.69x

LogMeIN, Inc.

LOGM

$324

$40

$98

$2,280

$2,500

$38

$217

$2,320

12%

27%

7.16x

6.83x

4.64x

4.09x

5.66x

5.22x

5.84x

5.18x

Marin Software, Inc.

MRIN

$106

-$4

$11

$57

$93

$3

$36

$59

-4%

-1%

0.56x

0.59x

0.47x

0.69x

1.10x

0.85x

1.55x

1.58x

Medidata Solutions, Inc.

MDSO

$438

$56

$77

$2,700

$2,930

$260

$330

$2,860

13%

14%

6.53x

7.46x

6.18x

4.87x

5.80x

7.19x

8.48x

7.60x

MobileIron, Inc.

MOBL

$162

-$55

-$28

$200

$347

$0

$80

$268

-34%

12%

1.66x

2.03x

1.03x

1.10x

1.56x

1.41x

2.60x

4.10x

New Relic, Inc.

NEWR

$222

-$60

$12

$1,280

$1,550

$0

$197

$1,353

-27%

55%

6.09x

8.69x

6.56x

6.91x

10.64x

10.84x

13.68x

13.99x

Proofpoint, Inc.

PFPT

$344

-$53

$60

$2,950

$3,120

$361

$412

$3,069

-15%

39%

8.93x

9.85x

8.10x

6.49x

10.79x

9.46x

10.64x

10.98x

Qualys, Inc.

QLYS

$190

$46

$79

$920

$1,160

$0

$210

$950

24%

22%

5.00x

6.25x

4.99x

3.83x

6.77x

5.44x

8.65x

10.43x

RealPage, Inc.

RP

$541

$75

$133

$2,470

$2,390

$123

$69

$2,444

14%

20%

4.52x

4.16x

3.67x

3.49x

3.56x

3.34x

3.66x

3.81x

RingCentral, Inc.

RNG

$359

-$10

$25

$1,380

$1,570

$16

$152

$1,434

-3%

30%

4.00x

4.72x

4.00x

3.85x

5.23x

4.23x

4.46x

4.25x

salesforce.com, Inc.

CRM

$7,910

$534

$1,870

$49,010

$47,900

$2,520

$1,200

$49,220

7%

32%

6.22x

6.65x

8.03x

7.25x

8.85x

7.30x

9.13x

8.26x

ServiceNow, Inc.

NOW

$1,290

-$83

$131

$12,030

$12,560

$499

$807

$12,252

-6%

41%

9.50x

10.68x

10.09x

7.85x

13.58x

12.52x

15.64x

16.69x

Splunk, Inc.

SPLK

$864

-$323

$176

$6,000

$7,120

$88

$1,030

$6,178

-37%

61%

7.15x

8.66x

9.26x

6.63x

11.80x

13.40x

17.39x

14.37x

SPS Commerce, Inc.

SPSC

$185

$18

$18

$1,070

$1,180

$0

$125

$1,055

10%

21%

5.71x

6.39x

4.66x

3.70x

7.02x

6.88x

7.18x

7.42x

The Ultimate Software Group, Inc.

ULTI

$741

$65

$125

$5,190

$5,400

$11

$111

$5,300

9%

27%

7.15x

8.32x

8.55x

7.34x

9.83x

8.61x

9.02x

9.25x

Veeva Systems Inc.

VEEV

$508

$104

$150

$5,070

$5,670

$0

$511

$5,159

21%

42%

10.15x

10.88x

9.37x

7.10x

8.11x

7.76x

10.48x

9.36x

Wix.com Ltd.

WIX

$263

-$44

$30

$1,760

$1,910

$0

$145

$1,765

-17%

40%

6.72x

7.11x

4.25x

3.16x

4.28x

4.06x

5.65x

4.36x

WorkDay, Inc.

WDAY

$1,460

-$244

$338

$11,900

$13,740

$528

$1,910

$12,358

-17%

50%

8.46x

12.37x

11.95x

9.19x

14.00x

13.50x

20.34x

18.12x

Zendesk, Inc.

ZEN

$286

-$83

$14

$1,810

$2,110

$0

$211

$1,899

-29%

55%

6.64x

10.18x

8.36x

6.38x

9.29x

8.98x

11.42x

13.65x

Secureworks

SCWX

$405

-$32

-$22

$743

$851

$0

$111

$740

-8%

---

1.83x

2.27x

3.37x

---

---

---

---

---

Appfolio, Inc.

APPF

$98

-$7

$2

$786

$775

$0

$18

$757

-8%

---

7.73x

7.01x

5.43x

9.69x

---

---

---

---

Atlassian Corporation

TEAM

$492

-$1

$144

$4,550

$5,420

$0

$754

$4,666

0%

---

9.48x

12.55x

9.65x

11.05x

---

---

---

---

Twilio

TWLO

$247

-$32

$0

$2,260

$2,310

$0

$252

$2,058

-13%

---

8.34x

23.42x

---

---

---

---

---

---

Instructure

INST

$101

-$50

-$19

$476

$559

$0

$83

$476

-49%

---

4.71x

7.06x

5.28x

6.40x

---

---

---

---

Mindbody, Inc

MB

$129

-$20

-$9

$792

$877

$16

$86

$806

-16%

---

6.25x

5.91x

4.06x

4.65x

---

---

---

---

Shopify

SHOP

$329

-$24

$12

$3,410

$3,810

$0

$400

$3,410

-7%

---

10.36x

12.58x

9.40x

11.59x

---

---

---

---

Xactly

XTLY

$92

-$14

-$6

$317

$343

$14

$41

$316

-16%

---

3.44x

4.85x

3.39x

2.88x

---

---

---

---

Nutanix

NTNX

$524

-$235

$13

$3,430

$3,740

$0

$347

$3,393

-45%

---

6.48x

---

---

---

---

---

---

---

Xero Limited

0XE.F

$174

-$57

-$17

$1,450

$1,590

$0

$95

$1,495

-33%

---

8.61x

---

---

---

---

---

---

---

Average

$549

-$20

$84

$3,368

$3,568

$128

$274

$3,422

-12%

30%

5.42x

6.65x

5.28x

4.87x

6.29x

6.30x

7.97x

7.71x

Median

$286

-$20

$14

$1,450

$1,590

$2

$145

$1,495

-8%

29%

5.75x

6.39x

4.83x

4.54x

5.92x

6.51x

7.18x

7.58x

We don’t believe the decline will necessarily continue or exacerbate: SaaS has tended to trade in a band of 4.54x to 7.58x over the past 8 quarters so we remain comfortably at the midpoint. Indeed over the past 10 years, multiples generally fall in a band between 4x and 6x, so 5.75x is quite healthy in our view.

A few more observations:

-Median and average revenue for the past 12 months of the 43 company data set was $286mm and $549mm respectively (the data is skewed by SalesForce which has $8bln of revenue). Year over year revenue growth is about 30%.

-From an EBITDA perspective, 30 of the 43 companies are burning cash with median trailing 12 month EBITDA of -$20mm. From an operating cash flow perspective, the metrics are better with 13 of the 43 companies burning cash – median operating cash flow was $14mm.

-SaaS companies continue to employ very little debt, with a median of only $2mm which is equivalent to 1% of enterprise value.

So what’s this mean for entrepreneurs? In our view the revenue multiple is stable and barring a recession, we don’t see a reason for a decline. Similarly, we don’t see much potential for a material increase in the multiple either. Now is as good a time as any to raise money so do it now while capital markets have the appetite.